Donald Trump’s Business Decisions in ’80s Nearly Led Him to Ruin

At one point, the balance of his personal bank accounts was expected to drop below $1 million.

By 1990, Mr. Trump had amassed $3.4 billion in debt, much of it in the form of high-interest junk bonds. He was personally liable for $832.5 million of that. He had bought a yacht for $29 million, the Plaza Hotel in Manhattan for $407 million and a failing airline for $365 million. All were losing money.

Details of the losses are not available, because the entities were privately held. But reviews by New Jersey casino regulators and securities filings related to debt offerings show a grim picture.

The Castle casino in Atlantic City recorded total losses of $93.2 million in 1990 and 1991. The Trump Regency hotel there lost $8.3 million in 1991. The Trump Plaza casino lost $29.2 million in 1991.

Casino regulators in New Jersey warned that “the possibility of a complete financial collapse of the Trump Organization is not out of the question.” Most, if not all, of those losses would pass through to Mr. Trump’s tax returns because of the ownership structure of the casinos.

The Casino Control Commission concluded in 1991 that “Mr. Trump cannot be considered financially stable, a condition for renewing his casino licenses at Taj Mahal, Castle and Plaza.” Still, it did not pull the plug on him.

Mr. Trump’s airline, Trump Shuttle, lost $34.5 million during just six months in 1990.Credit
David A. Cantor/Associated Press

“The consequences of doing that would have been horrific,” said Steven P. Perskie, who was chairman of the commission from 1991 to 1994. “We weren’t prepared to do that unless we had no choice.”

His airline, Trump Shuttle, lost $34.5 million during just six months in 1990.

In addition to actual losses from his other businesses, the nearly $1 billion total in losses probably also includes paper losses on Mr. Trump’s real estate holdings through the use of depreciation rules that allow real estate developers to deduct the cost of a building over a number of years.

By the end of 1991, the amount of cash that Mr. Trump had personally available to him had fallen below $1.7 million and was expected to fall below $800,000 within months — a small cushion given his monthly expenditures.

Further squeezed by a recession, Mr. Trump fell $4.1 million behind on the property tax bill for a large swath of land he owned on the West Side of Manhattan.

The measures he promised to take repeatedly did not work, casino regulators noted. At several points, he turned to his family fortune.

He promised to make up for a cash shortfall with the sale of condominium units in Trump Tower in Manhattan. When that did not generate enough money, he filled the hole in his balance sheet with the “unforecasted receipt of funds from certain family-owned properties in New York City” — apparently referring to fees from properties his father, Fred C. Trump, had built outside Manhattan.

Mr. Trump, outside the New York Stock Exchange, after he took the Trump Plaza casino in Atlantic City public in 1995.Credit
Kathy Willens/Associated Press

At the end of 1990, when Mr. Trump was facing an $18.4 million interest payment, his father sent a lawyer to the Castle casino to buy $3.3 million in chips and leave without cashing them, providing his son with an infusion of cash.

By 1993, Mr. Trump was still in dire straits. He dispatched a company executive to ask his siblings if he could borrow $10 million from their respective shares of the family trust. Mr. Trump received the loan, according to people who were involved and spoke on the condition of anonymity to avoid angering him, and went back for another $20 million the following year. Mr. Trump has denied borrowing from his siblings.

Mr. Trump had negotiated reduced interest rates on some of his loans, partially by agreeing to give up money-losing enterprises, including his airline, his yacht and a stake in the Plaza Hotel in Manhattan. His lenders forced him to live for a time on $450,000 a month.

In 1995, Mr. Trump began the transaction that would eventually free him from his financial travails. He took his struggling casinos public, selling stock to raise money and shifting his personal debt into the new company. The company continued to lose money and underperform its competitors, but Mr. Trump was paid roughly $45 million though 2009.

Mr. Wallach, who left the Trump Organization in 2001 to deal with a chronic shoplifting and theft problem, said the change in the organization was palpable. Mr. Trump began to regain his footing and focused again on real estate, taking steps to ensure that he was less dependent on his own cash and personally guaranteeing loans.

In 1996, the year that the tax records obtained by The Times were filed, Mr. Trump basked in the glow of news reports marking his apparent return from financial abyss. One such comeback article appeared in The Times in April of that year.

“This just represents the best point in my life,” Mr. Trump told a Times reporter as he settled into a stretch limousine. “I think it says that what I’ve been doing over the years has been right.”